Walmart Cuts ‘Small’ Stores

For much of the past decade this space has issued occasional pieces on Walmart’s admiration for and perhaps envy of the success of dollar store retailers. It is likely that Walmart’s generally disappointing domestic financials through many recent quarters have contributed to the company’s focus on dollar store financial successes, their strong growth through the daunting recession and the practicality and efficiencies of their compact, efficient store design and strong community stature.

Walmart’s admiration for this format has been strongly expressed over the past few years as the company began focusing on promoting the growth of its small stores, essentially acknowledging its lack of confidence in the growth potential of its big box formats. By stating its focus on the growth of its ‘small’ format stores, the company was including both its 15,000 sq. ft. Walmart Express concept with its 43,000 sq. ft. Neighborhood Market prototype.

In recent years this space has published insights questioning why the Neighborhood Market should even be considered a small format store. While the Express prototype touched on the size of larger Dollar General locations, Neighborhood Market stores are essentially Walmart’s version of the traditional supermarket. Calling these small stores was based on a definition decided upon by Walmart executives. Still Walmart insisted on lumping the two distinct formats as ‘small stores’, labeling growth of the concept as key to Walmart’s future.

Late last year this space published an Insight titled, Walmart Stops Expressing Itself. The article noted that Walmart had announced the abandonment of its Walmart Express concept. The retailer decided to convert its remaining 21 Walmart Express locations to its Neighborhood Market concept. This seemed odd as the company was suddenly squeezing a traditional supermarket format into a store about one third the size of its Neighborhood Markets. It seemed Walmart was abandoning truly small stores but claiming to maintain the concept by using its unique definition to maintain its pledge to grow the concept of small stores.

Now Walmart has announced another shift in its expansion plans. Despite impressive growth reflected in recent Neighborhood Market financials, the company has announced an immediate reduction in its Neighborhood Market expansion plans by 10-15 percent. This year Neighborhood Market comp sales grew by 7.9percent and then 7.3 percent in respective quarters.

In explaining this change, after years of pronouncing this format as its premier growth vehicle and after abandoning the Express concept, Walmart execs indicate that after fostering tremendous growth in the Neighborhood Market concept since its advent in 1998, the company has learned a great deal about its shoppers. Walmart execs now feel the future of the concept lies in growing the overall quality of its food offerings rather than the count of its locations.

With all its talk and analysis in recent quarters of the importance of growing the company domestically through its compact formats, it seems that in less than a year the company has abandoned its truly smallish Express concept and is now less than confident in the future growth of its very successful Neighborhood Market format. This was decided upon despite the tenuous argument that a Neighborhood Market is actually a small retail unit. Has Walmart abandoned its envy of small stores?

Last year, when Dollar Tree and Dollar General fought a bidding war to acquire Family Dollar, there was considerable speculation as to whether Walmart would enter the fray. Ultimately it seems Walmart decided to pass on the acquisition. Now it seems reluctant to aggressively commit to grow any ‘small’ format.

Arthur has worked at Chain Store Guide for 20 years. He received a B.A. degree from City College of New York and attained a master’s degree in electronic communications from Brooklyn College. Please contact him if you have any questions or comments.